What is Market Manipulation?
Today I’m going to offer you a brief overview of how to define market manipulation and some common examples of what constitutes market manipulation.
Market manipulation is an action (e.g. entering into a transaction, placing or cancelling an order, disseminating information, voicing a public opinion, etc.) that gives or may give false or misleading signals to the market participants about pricing, supply, demand, available quantities or other attributes of a product, asset, financial instrument, coin or a derivative.
Why this is important? – market manipulation is a serious crime and all FinTech startups who are operating marketplaces or facilitating transactions with assets that rely on markets for price discovery are responsible to ensure that they are able to detect and prevent market manipulation from happening on their platform, as much as possible.
Examples of market manipulation
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Market manipulation is an action (e.g. entering into a transaction, placing or cancelling an order, disseminating information, voicing a public opinion, etc.) that gives or may give false or misleading signals to the market participants about pricing, supply, demand, available quantities or other attributes of a product, asset, financial instrument, coin or a derivative.
Why this is important? – market manipulation is a serious crime and all FinTech startups who are operating marketplaces or facilitating transactions with assets that rely on markets for price discovery are responsible to ensure that they are able to detect and prevent market manipulation from happening on their platform, as much as possible.
Examples of market manipulation
- Creating or using so-called “dominant position” (in different countries either above 50% or above 70% of the market volume) which may have an impact of fixing the price, limiting demand or supply or otherwise unfair trading conditions.
- Buying or selling assets at the opening or closing of the market at the prices significantly different from the previous prices.
- Placing orders (including high frequency algorithmic trading) which can disrupt the trading system, making price discovery more difficult for others, destabilize or overload order book, creating false or misleading signals.
- Knowingly allowing insider trading.
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